Learn to invest with Buffett

Chapter 15

Chapter 2 Section 6 What to choose is more important than choosing the timing

I only like businesses that I can understand. This standard excludes 90% of companies; I want to see the general direction of this company in 10 years.

--Warren Buffett
Buffett is good at picking stocks, but he doesn't pay too much attention to timing. This is not to say that timing is not important, but to emphasize that you must see what the company you choose will look like in the next 10 years.He once said that although he did not own a chewing gum company, he could clearly see what those companies would look like in 10 years.The internet isn't going to change the way we chew gum, and in fact, nothing will change the way we chew gum.After that, many new products will continue to enter the trial period, and some will end in failure.This is the law of the development of things.

If you give him 10 billion, let him enter the chewing gum business and open a gap, Buffett thinks he can't do it.This is the basic principle of considering a business.He thinks that if you give him 10 billion yuan, it still can't deal much blow to your competitors?Give him 100 billion, how much will be the loss to Coca-Cola all over the world?It can't be done because their business is rock solid.If the money is used to occupy other fields, Buffett can always find a way to do things.Therefore, when he sees the general direction of a certain company 10 years from now, if he thinks that this cannot be achieved, he will never buy it.

For example, the Coca-Cola Company, which went public in 1919, was priced at around $40 at that time.A year later, the stock was down 50%, to $19.It looked like it was a disaster.The bottling problem, the sugar price hike, you can always find one reason or another that makes you think it's not a good time to buy.A few years later, there was the Great Depression, World War II, the nuclear arms race, etc.There is always a reason (to keep you from buying).If you bought a share for 40 yuan at the beginning, and then you reinvested the dividends (buy Coca-Cola shares), until now, the value of that Coke stock is 5000 million.This fact overwhelms everything.If you get the business model right, you can make a lot of money.

Timing the entry point can be difficult.So, if you have an excellent business, don't worry about the occurrence of a certain event, or its impact on the next year and so on.Of course, at some point in the past, the government imposed price controls.Businesses were thus unable to raise prices, and even the best businesses were affected sometimes, when See's Candy couldn't raise prices for a period of time.But regulation happens when it should, and it never turns a great business into a mediocre business.Governments cannot implement regulatory policies forever.

Investment motto:
Investors should be clear that a great business can predict what might happen in the future, but not necessarily when it will happen.The focus should be on choosing "what", not "when".If the judgment of "what" is correct, then there is no need to worry too much about "when".

(End of this chapter)